Amid accelerating inflation and tight competition for workers, U.S. companies plan to boost employee pay next year at a higher rate than in 2021, projecting 3% salary increases for executives, management, professional employees and support staff, and 2.8% higher payrolls for production and manual labor employees, according to a Willis Towers Watson survey.
Technology and pharmaceutical companies intend to raise pay 3.1% — the biggest boost among 1,220 companies surveyed — while those in oil and gas, and leisure and hospitality — some of the sectors hit hardest by the pandemic — are budgeting salary increases of 2.4%.
Ninety-seven percent of companies plan to boost salaries next year, an increase from the 92% of companies surveyed in 2020 that intended to raise employee pay this year, WTW said.
“There’s real pressure on employers” to compete for qualified workers, according to Adrienne Altman, a managing director at WTW and head of its North America rewards practice.
“The war for talent is pretty significant,” Altman said in an interview, noting that companies may need to increase pay in 2022 beyond current plans. “It remains to be seen whether employers are going to stick with a 3%” raise for next year.
Wages are just one closely watched indicator of price trends across the economy. Record monetary and fiscal stimulus, supply chain bottlenecks, a burst in post-lockdown economic growth, and a rebound in consumer spending have pushed up prices in recent months, prompting concerns that the U.S. is entering a period of sustained inflation.
Adding to a long list of warning signs, consumer prices rose 0.9% in June, the biggest monthly jump in 13 years, and U.S. consumer sentiment in early July slumped to its lowest level in five months on concerns that higher inflation will persist.
Still, not every indicator is flashing red. Bond traders during the past several weeks have signaled confidence in price stability, pushing down the yield on the benchmark 10-year Treasury note to 1.2% today from 1.745% on March 31.
Although companies ranging from Chipotle and McDonald’s to Under Armour and Bank of America have announced pay increases in recent months, worker pay is not rising at a pace that would fuel a wage-price spiral.
In June, average hourly earnings rose 0.3% compared with May and 3.6% compared with June 2020, according to the Labor Department.
President Biden yesterday noted that prices are rising but aligned with assertions by Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen by saying higher inflation is transitory.
“As demand returns, there’s going to be global supply chain challenges,” Biden said, adding that about 60% of the recent upward pressure on prices has come from temporary shocks to supply and demand.
Most companies wait until September or October to make their final decisions on pay increases for the coming year, Altman said, noting that inflation has flared as a business concern since April, when WTW began the survey. It completed the survey in June. “If you think back even three months ago, a lot has shifted.”